diff --git a/acapy_agent/protocols/issue_credential/v2_0/handlers/cred_issue_handler.py b/acapy_agent/protocols/issue_credential/v2_0/handlers/cred_issue_handler.py
index 9b065ab2d6..7765173daf 100644
--- a/acapy_agent/protocols/issue_credential/v2_0/handlers/cred_issue_handler.py
+++ b/acapy_agent/protocols/issue_credential/v2_0/handlers/cred_issue_handler.py
@@ -68,17 +68,32 @@ async def handle(self, context: RequestContext, responder: BaseResponder):
 
         # Automatically move to next state if flag is set
         if context.settings.get("debug.auto_store_credential"):
+            cred_store_succeeded = False
             try:
                 cred_ex_record = await cred_manager.store_credential(cred_ex_record)
+                cred_store_succeeded = True
+            except StorageError as err:
+                # Leave record in credential-received to allow manual retry
+                self._logger.exception(
+                    "Auto-store failed; leaving credential in received state"
+                )
+                if cred_ex_record:
+                    cred_ex_record.error_msg = err.roll_up
+                    async with context.profile.session() as session:
+                        await cred_ex_record.save(
+                            session,
+                            reason=err.roll_up,
+                        )
             except (
                 BaseModelError,
                 AnonCredsHolderError,
                 IndyHolderError,
-                StorageError,
                 V20CredManagerError,
             ) as err:
                 # treat failure to store as mangled on receipt hence protocol error
-                self._logger.exception("Error storing issued credential")
+                self._logger.exception(
+                    "Auto-store failed; abandoning credential exchange"
+                )
                 if cred_ex_record:
                     async with context.profile.session() as session:
                         await cred_ex_record.save_error_state(
@@ -92,11 +107,11 @@ async def handle(self, context: RequestContext, responder: BaseResponder):
                         )
                     )
 
-            cred_ack_message = await cred_manager.send_cred_ack(cred_ex_record)
-
-            trace_event(
-                context.settings,
-                cred_ack_message,
-                outcome="V20CredIssueHandler.handle.STORE",
-                perf_counter=r_time,
-            )
+            if cred_store_succeeded:
+                cred_ack_message = await cred_manager.send_cred_ack(cred_ex_record)
+                trace_event(
+                    context.settings,
+                    cred_ack_message,
+                    outcome="V20CredIssueHandler.handle.STORE",
+                    perf_counter=r_time,
+                )
diff --git a/acapy_agent/protocols/issue_credential/v2_0/handlers/tests/test_cred_issue_handler.py b/acapy_agent/protocols/issue_credential/v2_0/handlers/tests/test_cred_issue_handler.py
index fa491d5f4a..16213ef655 100644
--- a/acapy_agent/protocols/issue_credential/v2_0/handlers/tests/test_cred_issue_handler.py
+++ b/acapy_agent/protocols/issue_credential/v2_0/handlers/tests/test_cred_issue_handler.py
@@ -75,10 +75,12 @@ async def test_called_auto_store_x_indy(self):
         with mock.patch.object(
             test_module, "V20CredManager", autospec=True
         ) as mock_cred_mgr:
+            mock_cred_ex = mock.MagicMock(
+                save_error_state=mock.CoroutineMock(),
+                save=mock.CoroutineMock(),
+            )
             mock_cred_mgr.return_value = mock.MagicMock(
-                receive_credential=mock.CoroutineMock(
-                    return_value=mock.MagicMock(save_error_state=mock.CoroutineMock())
-                ),
+                receive_credential=mock.CoroutineMock(return_value=mock_cred_ex),
                 store_credential=mock.CoroutineMock(
                     side_effect=[
                         test_module.IndyHolderError,
@@ -92,18 +94,25 @@ async def test_called_auto_store_x_indy(self):
             self.request_context.connection_ready = True
             handler_inst = test_module.V20CredIssueHandler()
             responder = MockResponder()
+            self.request_context.settings["debug.auto_store_credential"] = True
 
             await handler_inst.handle(self.request_context, responder)  # holder error
             await handler_inst.handle(self.request_context, responder)  # storage error
 
+        assert mock_cred_mgr.return_value.send_cred_ack.call_count == 0
+        assert mock_cred_ex.save_error_state.call_count == 1
+        assert mock_cred_ex.save.call_count == 1
+
     async def test_called_auto_store_x_anoncreds(self):
         with mock.patch.object(
             test_module, "V20CredManager", autospec=True
         ) as mock_cred_mgr:
+            mock_cred_ex = mock.MagicMock(
+                save_error_state=mock.CoroutineMock(),
+                save=mock.CoroutineMock(),
+            )
             mock_cred_mgr.return_value = mock.MagicMock(
-                receive_credential=mock.CoroutineMock(
-                    return_value=mock.MagicMock(save_error_state=mock.CoroutineMock())
-                ),
+                receive_credential=mock.CoroutineMock(return_value=mock_cred_ex),
                 store_credential=mock.CoroutineMock(
                     side_effect=[
                         test_module.AnonCredsHolderError,
@@ -117,10 +126,15 @@ async def test_called_auto_store_x_anoncreds(self):
             self.request_context.connection_ready = True
             handler_inst = test_module.V20CredIssueHandler()
             responder = MockResponder()
+            self.request_context.settings["debug.auto_store_credential"] = True
 
             await handler_inst.handle(self.request_context, responder)  # holder error
             await handler_inst.handle(self.request_context, responder)  # storage error
 
+        assert mock_cred_mgr.return_value.send_cred_ack.call_count == 0
+        assert mock_cred_ex.save_error_state.call_count == 1
+        assert mock_cred_ex.save.call_count == 1
+
     async def test_called_not_ready(self):
         with mock.patch.object(
             test_module, "V20CredManager", autospec=True